Everything you need to know about Education Loan

Posted in: Bank Loan | on: December 5, 2020

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What is Education Loan/ Student Loan?

To lead a successful life, quality education is must. To attain quality education, students often go in search of top institutions. As the cost of education is higher in most of the top institutions, it poses great challenge in a student's life. Though parents make long-term investment in Fixed Deposits and Mutual Funds, they still face shortage of money when it comes to education. With education loan, students can pursue their education in desired institution without worrying about the cost of education. Education loan fulfills the dream of every student in attaining best education.

What are the benefits in taking Education Loan?

Some of the benefits of taking an education loan are,

  • Education loan is available up to Rs. 1 crore.
  • The tenure for loan repayment is up to 15 years.
  • The interest for education loan starts from 7.30% per annum.
  • Door-step facility to collect necessary documents is available.
  • Under Section 80E of Income Tax act, the education loan interest is eligible for tax deduction for 8 years on condition that the loan must be taken from specific bank or financial institution.
  • Education loan covers not only the basic course fee but also the entire education expenses such as tuition and hostel fee, exam fee, library fee, lab fee, cost of books, uniform and other essentials, travelling expenses and any refundable fees paid to the institution.
  • Female students who are pursuing their higher education get 0.5% discount on education loan interest.
  • Banks provide loan moratorium period from 6 months to 1 year after course completion.

What are all covered under Education Loan?

Education loan covers the following expenses.

  • Basic course fees
  • Travel expenses
  • College accommodation fee
  • Insurance premium
  • Exam/lab/library fees
  • Caution deposit
  • Cost of laptop/computer needed for the course
  • Cost of uniform/books/instruments/equipment
  • Other miscellaneous charges

Who can apply for Education Loan?

A student is the main applicant. The co-applicant can be a parent, spouse or sibling.

Who can get Education Loan?

Students who want to study in India or pursue their higher education abroad can get education loan. However, the maximum loan amount to pursue studies in India and abroad may vary and differ for each bank.

What type of courses are covered under Education Loan?

All type of courses, be it full-time, part-time or vocational course and under graduate or post graduate courses in fields like engineering, medical, management, architecture, hotel management, etc. are all covered under education loan.

What are the eligibility requirements to apply for Education Loan?

In order to apply for education loan,

  • The applicant must be an Indian citizen.
  • The applicant must get admission in a recognized college/university in India or abroad. But some banks offer loan even before getting admission in the college.
  • The applicant should have completed HSLC.
  • Though some banks have upper age limit restrictions, there is no such restrictions in RBI guidelines.

What are the documents needed to apply for Education Loan?

Banks require the following documents from the applicant to offer education loan.

  • College admission letter
  • Fee structure
  • SSLC and HSLC Marksheet
  • UG Marksheet (For PG Studies)
  • Income Tax Returns or Salary slips of the co-applicant.
  • Age Proof
  • ID Proof
  • Address Proof
  • Signature Proof
  • Duly filled application form with signature
  • Recent bank account statement
  • Recent Passport size photo

How to apply for Education Loan?

Students can apply for education loan in any one of the following ways.

Online:

You can easily apply for education loan in online. To apply in online, visit the official portal of the lender, fill the application form in online, attach necessary documents and submit the form.

Offline:

To apply for education loan in offline, visit your nearest branch with required documents, discuss the loan terms with the representative, fill the application form and submit it. You can also request a call back from the lender, discuss the loan terms and then proceed to apply.

Virtual Assistant:

Lenders are now providing digital services to their customers. The virtual assistant is one such method which clears your doubts and assists you with the application procedure.

How to repay Education Loan?

Once you have completed your studies or got job, the bank provides moratorium from 6 months to 1 year. After this moratorium period, you need to start repaying loan via EMIs.

Some of the modes you can repay your education loan are,

  • Net Banking
  • Cheque
  • Direct Debit
  • Demand Draft

Before taking loan, choose your repayment mode as it varies from one lender to another.

Top Education Loan Providers - Compare here!

Name of the Bank Loan Amount Interest Rate Processing Fee Repayment Period Repayment Holiday Security Margin
SBI Above Rs. 20 lakhs 9.30% p.a
  • No charge for loan up to Rs. 20 lakhs
  • Rs. 10,000 + Tax for loans above Rs. 20 lakhs
15 years 12 months No collateral security or third party guarantee up to Rs. 7.5 lakhs No margin up to Rs. 4 lakhs
PNB Up to Rs. 15 lakhs 7.30% onwards 1% of loan amount 15 years 6 months - 1 year No collateral security up to Rs. 7.5 lakhs. No margin up to Rs. 4 lakhs
Axis Bank Up to Rs. 7.5 lakhs 13.70 - 15.20% Nil to Rs. 15,000 + Tax 15 years 6 months - 1 year Collateral security will be asked for appropriate cases. Nil up to Rs. 4 lakhs
Bank of Baroda Up to Rs. 4 lakhs and above 8.25 - 10% 1% of loan amount up to Rs. 10,000 10 - 15 years 6 months - 1 year 100% tangible security Nil up to Rs. 4 lakhs
HDFC Bank Up to Rs. 20 lakhs Preferential rates for top colleges Up to 1.5% of loan amount + Tax 15 years 6 months - 1 year Nil to up to Rs. 7.5 lakhs Nil up to Rs. 4 lakhs
TATA Capital Up to Rs. 30 lakhs 10.99% onwards Up to 2.5% of loan amount + Tax 6 years 6 months - 1 year Nil up to Rs. 4 lakhs -
Union Bank of India Need-based finance 6.90% onwards 0.50 + GST for NRI students 15 years 6 months - 1 year No collateral security up to Rs. 7.5 lakhs Nil up to Rs. 4 lakhs
Bank of India Need-based finance 9.10% onwards Rs. 5000 + other fees for studies abroad 15 years 1 year No collateral security up to Rs. 7.5 lakhs Nil up to Rs. 4 lakhs


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